DC Circuit Overturns FCC’s Expansion of Robocall Prohibitions

Alert

03.19.2018

On Friday, March 16, 2018, the DC Circuit issued its long-awaited opinion in ACA International v. FCC, No. 15-2011, a case challenging the Federal Communications Commission's interpretation of the robocalling provisions of the Telephone Consumer Protection Act. The court’s opinion, which places limits on what constitutes a prohibited robocall under the TCPA, is good news for utilities and any other entity that uses modern technology to communicate with customers.

One of the primary provisions of the TCPA is a prohibition on autodialing cellphone users without their express prior consent. In 2015, the FCC issued a declaratory order interpreting this provision. Two features of the FCC’s order were of particular concern to businesses, including electric, natural gas and water utilities. First, under the order, the autodialer prohibition applied if the equipment from which the calls were made was "capable" of autodialing, even if the call was placed manually. As almost all modern communications equipment contains software—and thus, is "capable" of autodialing—the FCC’s order greatly expanded the scope of the TCPA. Second, the agency’s order addressed liability when the caller had gained express consent for the call but the cellphone number had been reassigned to a new person. Under the order, callers could be penalized for making a call to a cellphone number that had been reassigned, even if the caller thought in good faith it was calling the party that had given consent to be contacted. The FCC created a narrow exception to this potential liability: the caller could make one call to the reassigned number without penalty, but every call thereafter would be penalized.

To support challenges to the FCC’s order, the Edison Electric Institute, the American Gas Association, the National Rural Electric Cooperative Association and the National Association of Water Companies filed an amicus brief. The utility amici, written by Stinson Leonard Street attorneys Russell Frisby and Harvey Reiter, argued that both aspects of the FCC’s order were contrary to the purposes of the TCPA.

The first portion of the order, the utilities said, would unreasonably make utilities subject to potential liability for every call — automated or manual—placed to a cellphone, since virtually every phone has the capability to autodial.

As to the second portion of the order, the utilities argued that the FCC had set up a standard that would be not only be impossible to meet, but that would run counter to the purpose of the TCPA—to prevent unwanted calls. Utilities have been asked not only by their regulators, but by their customers, for prompt information about service interruptions and the status of restoration efforts. They pointed out that where calls are made to inform customers of service restoration efforts, customers might get more than one call in a day. The second call would be penalized even though it would be impossible to know, in the short time between the original call and the follow up call, that the number the utility had dialed had been reassigned to a third party that had not consented to be contacted.

The court ruled in the petitioners' and the utilities’ favor on both points.

The FCC’s understanding of the types of calling equipment that fall within the TCPA’s restrictions, the court held, would even "subject ordinary calls from any conventional smartphone to the Act’s coverage, an unreasonably expansive interpretation of the statute."

The court also stated that it was vacating "the agency’s approach to calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (nonconsenting) person." This approach, the court reasoned, was completely arbitrary. The FCC, it said, "did not hold a caller strictly liable when unaware that the consenting party’s number has been reassigned to another person. Instead, the agency allowed one—and only one—liability-free, post-reassignment call for callers who lack 'knowledge of [the] reassignment' and possess 'a reasonable basis to believe that they have valid consent.'" "[T]he reason the Commission cared about affording an opportunity to learn about reassignment at all is in order to give effect to a caller’s reasonable reliance on the previous subscriber’s consent." But if that was so, the court concluded, there was no logical reason to limit the caller to one post-reassignment call. This conclusion reflected the reality facing utilities. They might, indeed probably would, make several calls a day to customers to update them on service restoration work and when they could return to their homes.

The court's opinion will have a positive impact on utilities and other businesses that might otherwise face stiff penalties of $500 for each inadvertent automated call to a reassigned number, a liability that could easily run into many millions of dollars for even a medium-sized utility.

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